Glossary · People and paperwork
Non-Compete Agreement(Non-compete)
In short
A contract preventing the seller from starting or working for a competing business for a set period within a defined geographic area. This protects your investment by ensuring the seller doesn't immediately become a rival.
What it means in a deal
A strong non-compete is critical in a small business acquisition to protect the goodwill you're buying. Ensure the terms (duration, geography, scope) are reasonable and enforceable in your state. The SBA allows up to $500,000 of the loan proceeds to pay for the non-compete.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Non-Compete Agreement
- Does the departing partner need to sign a non-compete agreement for an SBA-financed buyout?
- What is the importance of a non-compete agreement from the seller in an SBA 7(a) acquisition?
- Can I include the cost of a non-compete agreement with the seller in my SBA 7(a) loan?
- For a partner buyout, what if the departing partner also has a non-compete payment?
- What specific language must a non-SBA third-party standby agreement include to ensure eligibility?
- Are funds from a non-U.S. citizen or non-resident investor acceptable for equity injection?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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